Beaver Valley Resorts is considering an acquisition of a smaller resort in nearby Collingwood. Before the acquisition, the expected profitability levels for the resort were as follows:

BEFORE:	Profit levels (Mlns)	Probability
Recession	$20	0.1
Normal economy	$80	0.3
Strong economy	$90	0.6

AFTER:	Profit levels (Mlns)	Probability
Recession	$13	0.1
Normal economy	$80	0.3
Strong economy	$105	0.6

AFTER the acquisition:

Expected value	$83.0 million
Standard deviation	$35.5 million
Coefficient of variation	0.6

Make sure to show ALL work:

1. Using the above data, calculate the following for the company BEFORE the acquisition:

1. (2 marks) Expected profit
2. (2 marks) Standard deviation
3. (1 mark) Coefficient of variation

2. (3 marks) Based on the data provided and your answer in part a), do you think the company should make the acquisition? Explain your response.
3. (2 marks) Do you think this acquisition benefits from the portfolio effect? Explain why, or why not.

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